Oil scandal: What did ministry bosses know?
The spotlight is now turning on the role of permanent secretaries in the running of parastatals even as the Government moved last week to sack chief executives of two key state corporations.
And as the Government promised investigations, the chairman of the Public Accounts Committee in Parliament, Dr Bonny Khalwale, argued that the net should be widened so that culpability was shared by accounting officers of parent ministries of the parastatals under investigations.
Kenya Pipeline Company managing director George Okungu and his Kenya Tourism Board (KTB) counterpart Ong’ong’a Achieng’ were sent home to pave the way for investigations into irregularities in the two organisations.
Importation
Mr Okungu was sent packing on Friday together with KPC chairman James Kenani over a scandal in which millions of litres of oil held in trust for financial institutions involved in oil importation were irregularly released to the troubled Triton oil company.
The scandal has not only left three international oil companies, including the Kenya Commercial Bank at the risk of losing Sh7.6 billion but also dealt a blow to the integrity and security of the Kenya Pipeline system.
The foreign institutions are Fortis Bank of the Netherlands, Glencore International of the United Kingdom and Emirates National Oil Corporation of the UAE.
In total, 126.4 million litres was irregularly moved out of the KPC system. Under the State Corporations Act, chief executives of parastatals are accountable to permanent secretaries who also nominate alternate directors to the boards of these institutions.
Dr Khalwale said the Government was “pretending” by sacking the managing directors and was not addressing the serious problem of corruption up the ladder.
“We would be happy to see investigations in the two parastatals and those responsible for the irregularities up the ladder be held to account as well,” the Ikolomani MP added.
The Law Society of Kenya said parastatal chiefs cannot run the organisations without constant communication with the parent ministry.
Council member Evans Monari said investigations should not spare ministry officials including ministers and permanent secretaries.
“There is no way chief executives can have full control of parastatals; there is always political interference,” Mr Monari added.
Mr Okungu was on Saturday blocked from entering his office in Kenpipe Plaza in Nairobi’s Industrial Area allegedly to clear his personal effects in what was said to be a precautionary measure by the Ministry of Energy.
Energy permanent secretary Patrick Nyoike said the ministry acted against Mr Okungu after it emerged that senior officials at Kenya Pipeline appeared to have colluded with Triton to release oil without the knowledge of the financiers.
Mr Nyoike said the KPC boss was stopped from accessing his office at the weekend because there was no emergency. “Being a Saturday, and there being no emergency, we thought it was not proper for him to go there. We don’t want people to accuse us of negligence during this time of investigations,” he said.
The Triton matter came up mid-November when Kenya Commercial Bank wrote to KPC asking about the amount of oil they were holding in trust for Triton. KPC said it was holding 30 million litres.
The letter was copied to Glencore, the financiers of Triton, who responded to KCB saying they had financed 38 million litres.
In a second letter, KCB asked Pipeline not to release the oil to Triton until its finances were paid in full. However, a KPC official wrote to KCB and Glencore saying that their records showed that they were not holding any oil for Triton.
“When I asked Mr Okungu about the issue he told me this was done by his officers without his knowledge and that is why two officers involved were suspended,” Mr Nyoike added.
Mr Nyoike disclosed that Triton had won a tender to import crude oil but failed to deliver. “It transferred the rights to Gulf Energy which went ahead to bring the consignment,” the PS said.
The PS said he had been giving “guidance” to KPC “but it appears some companies were acting smarter and getting more than their proportional share of ullage (storage space in the Mombasa oil depot)”.
“I am not involved in day-to-day activities of running the firm… it has a managing director. If things go wrong I call its management and lodge investigations,” Mr Nyoike added. He said he was willing to defend himself over his duties as the PS.
On Sunday, sources in the oil sector linked Mr Okungu’s sacking to a Sh14.4 billion agreement he had allegedly signed with a consortium of local banks to extend the pipeline to western Kenya.
The sources intimated that some powerful people in the Government wanted a say in the project but Mr Okungu had blocked them. Of the Sh14.4 billion, KPC was to raise Sh6 billion from its profits while the banks were to foot the balance.
At the Tourism Board Dr Achieng’ was sacked on Wednesday over irregular payments amounting to Sh43 million to two private companies.
The irregularity at the KTB involved payment of Sh43 million to private companies without approval of the board. The Auditor and Controller General’s report shows that the Catering and Tourism Development Levy Trustee paid the money to two private companies without following tendering procedures.
Documents seen by The EastAfrican show that although Dr Achieng’ had initiated the process of requesting for the payments, he had been given the go-ahead by Tourism permanent secretary Rebecca Nabutola.
The documents show that both Mrs Nabutola and Dr Achieng’ individually instructed the parastatal to pay Prime Outdoor Network, an advertising company, and Maniago Safaris Ltd Sh43,925,444.
Prime Outdoor Network received Sh35 million while Maniago got Sh8,925,444 on September 24, last year. Maniago’s managing director Duncan Muriuki was a KTB board member until his dismissal together with Dr Achieng’.
On Sunday, Immigration minister Otieno Kajwang’ said permanent secretaries as accounting officers of ministries should come clean on the irregularities.
He said chief executives of parastatals could not run the organisations without regularly consulting their permanent secretaries.
